Sunday, October 28, 2007

Vince (1929- 2007)

By all accounts Vince spent a life of intellectual pursuits. He was a high achiever in academic studies, having graduated in the top of every class of which he was ever a part. He trained in specialty medicine and practiced radiology for a couple decades. In his fifties, ever the student, he went back to complete a 3 year residency in psychiatry which was his first love. When Vince had finished medical school in the 1950’s the field of psychiatry was still nascent, offering only crude pharmaceuticals and questionable therapies such as electroshock. Vince, instead, chose to study the burgeoning area of radiology and subsequently spent the 1960’s and 70’s and 80’s taking part in the introduction of exciting technologies such as CT scanning, MRI’s, ultrasound, and mammography.

By the mid-1980’s, psychiatry had come into it’s own. New insights and pharmaceuticals had revolutionized the practice of general psychiatry. Locked wards were being emptied out and adult programs were mainstreaming otherwise debilitated individuals into the workforce. Vince enjoyed psychoanalysis as well as medical management, and enjoyed the discussion of the controversies just as much as the practice of the art. He operated his storefront office in the south suburbs for a decade and served his “carriage trade” of professionals and working class alike.

This past week, I have received correspondence about Vince from his siblings. He was the older brother to three sisters, all remarkable people in their own right. They relate the quiet thoughtfulness of their brother, which was often unnoticed amid all the boisterous verbal sparring that marked Vince’s demeanor. His letters home from military service, his advice about academic studies, the respect he showed only in private times were all heartfelt examples of the genuineness of Vince’s approach. He wasn’t one to burden an event with sentimental fluff or diplomatic tact; he always said what he meant to say. Always. For better or for worse. If you were acting stupidly or your argument was flawed, Vince was the one to point that out, but that didn’t necessarily indicate that his intentions weren’t pure.

Vince was a complex person. He loved opera, Carl Jung and was a lifelong student of the panoply of religious thinking and experience. One of my earlier memories of my dad was attending a Unitarian service with him of the rock opera Jesus Christ Superstar in the 1970’s. The music was set to a slide presentation showing recent examples of betrayal, suffering and redemption. To me, it was a bit scary and overwhelming and afterward my dad put his arm on my shoulder and said that we should all use this Jesus figure, whether it’s fictional or not, as an example by which to live our own lives. And he wiped a tear from his eye, smiled, and then added, “you know, except for that crucifixion part.” He studied the Dalai Lama’s teachings and praised Martin Luther King’s rhetoric long before they had become the icons known today.

He was a student of Buddhist thought and practice, being sure to remind anyone that he preferred the Mahayana over the Theravada. He revered earth religions of various aboriginal cultures. He was well versed in Hindu symbolism. He could give hours of lectures on the pagan mythology, and did. As a modern day William James, Vince saw the interconnection of the various religions and spiritual practices among all the people of the world. He saw value in the Pope’s teachings and those of the lost Gospels and the Bhagavad Ghita, as well the value of the accessibility of even scurrilous self-promoters like Wayne Dyer or Werner Erhard.

When I was going through one of those mundane existential crises of late adolescence, Vince sat me down for a series of rather long fatherly discussions. (We rarely had many “short” discussions.) He showed me the similarities between prayer and meditation… and the differences. I learned the virtue of ceremony; the purpose of the Eucharist; the universality of the idea of salvation. Whether you were a Cherokee warrior living in 17th century America or a Ming Dynasty peasant or an Episcopalian from Naperville Illinois, religious experience and purpose had certain distinct similarities. Vince could synthesize the important tenets of the sundry practices and distill them into a useful instruction for every day life. Just as any physician will pursue all avenues for the benefit of his or her patient, he used his immense intellect to help people, not the least of whom was his son. Most importantly, I learned that my Dad cared.

There were other sides to Vince to be sure. He was one of the first Trekkies, never missing an episode of the fairly unpopular series during it’s first run. I remember sitting in Gram and Pop’s kitchen on Damen Avenue with my Dad watching Captain James T. Kirk seducing some bizarre alien on black and white television. Who knew that franchise would take off?

Nobody laughed harder at the Three Stooges than Vince. If he caught me or my brothers watching the old re-runs, he would roll his eyes and scoff at the “stupid” (always pronounced STOO-pid) antics, but within a few minutes he wouldn’t be able to hold back his chuckles when Moe pulled out Larry’s hair in anger or when Curley did the circle dance to his trademark woop woop woop. Likewise, Ralph Kramden was one of his heroes as well as Archie Bunker, and he even got a kick out of the puerile cartoon Beavis and Butthead.

As a kid, some of my fondest memories were vacations with Vince. One trip when I was 15 years old was out West to see the Badlands and the Arizona desert. The whole family, sans my sister, went on the camping excursion through the Dakotas and Wyoming and then headed south to the Grand Canyon. I remember July Fourth 1976, the Bicentennial, in a small town in Minnesota. The fireworks and flags and patriotism of small town Americana were special.

As we drove to see Mount Rushmore and Wall Drug and the other obligatory sites, Vince would entertain with his endless barrage of corny jokes and songs (he was his father’s son, after all). Do you know what they call Holiday Inns in Hawaii? he would ask. Hula day Inns!” Of course, he would repeat this every single time he saw a Holiday Inn sign. Do you realize how many Holiday Inns there are over the 3000 miles of Interstates we traveled? But we laughed every time he said it, and would secretly hope he would miss the next sign as we saw it in the distance… he never did.

We stopped at a small gas station on some back road outside of Rock Springs Wyoming. The owner was a grizzled WW 2 vintage guy with a buzz cut and a silent and stern countenance. His wife was an Asian woman of the same age who, despite probably living here for 20 or 30 years, spoke very little English. Dad pointed out that they probably met during the war and he brought her back to run the station. She was the friendly one, asking us where we were headed and making other small talk. We told her we were on our way to Utah and Arizona before going back to the Midwest. “Oh! You go to OOH-tah? OOH-tah HOT! You go to OOH-tah, yes? OOH-tah HOT!! HOT!!” I could see the half-smile erupt over Vince’s face as he filed that away for later.

The next night we camped at about three thousand feet in some Utah State Park. Temperatures plunged to the unseasonable 30’s overnight and the next morning Vince was up bright and early making coffee and ripping open the canvas flaps of the trailer tent and throwing off our thick quilts. As the frigid air singed my bare legs and butt, Vince’s demonic cries could be heard through the piercing cold. “OOH-tah HOT!! Oh! You go to OOH-tah? OOH-tah HOT! You go to OOH-tah, yes? OOH-tah HOT!! HOT!!” Then he would clap his hands in rapid succession like a drill sergeant until we were all up, dressed and packed for the road.

Vince was a political junkie. He would read any number of commentary magazines from the conservative National Review to the liberal The Nation, and everything in between. The 1980 Republican convention is a particular memory. He had an admiration for Ronald Reagan’s simplicity and forthrightness, but feared his henchmen in the White House. As usual, Vince’s admonitions were correct as the duplicity of Reagan's staff became known during the Iran-Contra hearings to the regret of the entire nation.

As the years went on, Vince became even more liberal in his thinking and while always the pacifist, he began to see the increasing value of the government’s role in taking care of those who cannot care for themselves. Health care is and should be a right. Education should be free, not only for the benefit of the poor, but for the enlightened self-interest of the entire planet. He was a fan of Kurt Vonnegut’s and Joseph Heller's anti-establishmentism, and was one of the first to protest the Vietnam War. As part of his protest, he refused to get a haircut in the 1970’s until the war ended, to the dismay of his buttoned down medical group. Question authority. More recently, Vince held a special animosity in his heart for George W. Bush.

Vince lived the life that he chose to live. He was blessed to have the devotion of a beautiful wife. His only requirement of his children was that they follow their own happiness.


I vividly remember the pride my dad showed when he himself hooded me at Rockefeller Chapel upon my graduation from medical school. Since then we have had the distinct bond that only comes from the fraternal relationship among physicians and surgeons. He certainly loved me my whole life, but I always felt that a particular respect was born on that special afternoon. His smile was a little wider than usual and his hug was a little tighter. Vince has always been my ideal for what a physician should be.

I miss my Dad. Needless to say he has been a big part of who I have become (the good parts anyway.) I think about him and feel his presence everyday. These last couple years I have increasingly missed his words of wisdom, his smile and wit, and his unfailing willingness to tell me when I have been wrong and when I have been right. In many many ways, he was my rock.

My Dad always challenged me to use my brain, but did not hesitate to bare his soul to me as well. I could always do better and be better, but his love was unconditional. Vince was never afraid to give his opinion on any matter of things, and whether you agreed with him or not, you knew that his opinions were always well-considered. Vince is my ideal for what a father should be.

I love you, Dad. And if there is a heaven, I know you are there.

And on the off chance that there is indeed a God, well… good luck, God… and please take care of him.

Saturday, October 13, 2007

The Victimization of Graeme Frost

The national debate about health care is reaching new lows with each heart-wrenching chapter, the latest is the Graeme Frost Tragedy. Graeme is a hero, no question. He has endured more than any 12 year-old should. He appears to be a smart kid who is articulate and by all accounts hard-working. He sustained life-threatening injuries and was hospitalized and still undergoes therapy. Now he has has been subjected to the circus of our pop culture punditocracy. It's an atrocious spectacle by any measure.

Paul Krugman, with whom I agree on nearly every issue, has taken the opportunity to pen a column on the “Sliming of Graeme Frost.” When I saw the title I fantasized that Krugman was taking his sharp aim at the true culprits in this crime, but alas, he has instead emptied is revolver on the easier, albeit improper, target. Instead of holding our congressional leaders to task, he spent precious ink blasting the right wing noise machine.

Graeme Frost bravely and with the precious naivete of a good kid went before the nation to represent the Democrats in the Saturday radio address last week. He was also trotted out in front of the TV cameras with Uncle Harry and Aunt Nancy for a photo op in support of the expansion of the S-Chip grant to provide health care for the working poor. To the feigned surprise of all, the vile right wing misanthropes stalked the Frost family and found all the dirt they could, true or not, that could be printed and screamed over the airwaves. Harpies like Michelle Malkin and blowhards like Rush Limbaugh have sold ad time with their baseless campaign to smear the Frost family. Hmmm, who could have predicted that?

Unfortunately, economist commentators such as Krugman have made this debate as much about the sliming of Graeme Frost as about the true debate, which is the unsustainability of the current health care system and ways to fix it. He should know better, and more importantly our Democratic leadership should know better-- and do better. And we rely on writers like Krugman to provide comment about our political leaders, not about the misbehavior of Limbaugh and Malkin.

If Pelosi and Reid would spend more time noodling the health care crisis and crafting legislation to provide a comprehensive program for all Americans and less time pandering to their constituents and subjecting kids like Graeme to the venom of right wing morons, then maybe we could actually accomplish a sustainable fix to the problems we have. And why doesn't Krugman recognize this?

Graeme said, "Most kids my age probably haven't heard of CHIP, the Children's Health Insurance Program, but I know all about it, because if it weren't for CHIP, I might not be here today." While this kid may believe this, it isn't exactly true. Emergency care is always provided regardless of the patient's ability to pay. Without S-Chip, Graeme's father Halsey may have been sent a bill, he may have had to sell some of his assets, he may have had to even file for bankruptcy but the fact is that Graeme would hve gotten the care he needed with or without S-Chip. The drama may get votes for Democratic candidates, but it moves us not one inch closer to a solution.

As the New York Times points out: Under the Maryland child health program, a family of six must earn less than $55,220 a year for children to qualify. The program does not require applicants to list their assets, which do not affect eligibility. The TIME coverage points out: “In short, just as the radio spot claimed, the Frosts are precisely the kind of people that the SCHIP program was intended to help.” Exactly. The Frosts qualified for the old version of S-Chip. The expansion of coverage into the middle class is not necessary to provide for working poor families like the Frosts. The Congressional plan which was vetoed by George W. Bush is an expansion of the grant program to give benefits to more middle class folks, so why is this family's plight even relevant?

Hasn't Graeme Frost been through enough already, and shouldn't his parents know this? Halsey Frost is a father who cannot provide for the basic needs of his large family-- fine; but the least he could do is protect his kids from the cruel vagaries of our grotesquely partisan political system.

Halsey Frost, Graeme's father, bemoans his family's situation, “We work hard, we’re honest, we pay our taxes. There are hard-working families that really need affordable health insurance.” First of all, let's be honest: Mr. Frost does not pay taxes, or at least not a significant amount of federal taxes, which is the pool that covers this grant program. By my estimate, assuming a standard deduction, the very most the Frosts' pay in federal income tax is $1300 per year, but most likely they pay nothing. Halsey is correct that working families need affordable insurance; S-Chip is not the answer mainly because it is not insurance, it's welfare.

Certainly through no fault of their own, the Frosts were not asked to pay anything for their health care coverage. The federal legislation is based on self-reported income and does not require premiums or co-pays (although states have some latitude) or listing of his assets. How much did the Frosts pay for their S-Chip coverage? My guess is very little, if anything. Now we are going to expand this program to middle class families with no requirement to pay tax or premiums? Suppose Frost's business takes off and he enjoys more success in the years ahead. Would he have incentive build more equity in his business in lieu of salary, thus perpetuating his welfare status? Would other more prosperous families who are close to the S-Chip income cut-off be tempted to work less in order to get these benefits?

In short, this debate has been side-tracked by the completely predictable sliming of Graeme Frost, and the counter-sliming of the right wing idiocracy by the Democrats. What this country needs is a comprehensive health care policy, as every other developed nation has, and the debate needs to be managed by the adults in our congressional leadership and not some well-meaning kid who would be better off in school. The current health care patchwork with it's creeping reliance on welfare and now pandering to the middle class and the glorification of victimization is simply not sustainable.


My next post will attempt to flesh out the requirements of a national health care policy. Be patient, there are no easy answers. A note to Anonymous: this is not about me. I'm not a pediatrician or even a primary care doctor, but I do recognize the obvious, and the obvious is that in real dollars primary care doctors' salaries have dropped, residency programs cannot convince medical students to pursue these careers and a shortage of these physicians is worsening.

Tuesday, October 09, 2007

S-Chip is Not Insurance-- it's Welfare

(If you want to cut to the chase, then skip to the last bullet point at the end.)

I'm all for providing health care for kids. Everyone's kids. As long as we're at it, let's get health care for everyone. Period. Even the adults. Old people, vets, the indigent, the disabled and now kids are all included, which leaves only adults being uncovered by government programs. So why not cover all adults as well? Universal health care is certainly a worthwhile endeavor, and before I'm asked to pay for able-bodied middle class parents' kids, I'll ask to be included myself. Short of that, I'll vote no on middle class kids' being on the dole, because that is definitely what the expansion of S-Chip is when it includes those families living at 300% of the poverty level.

Seniors have paid their Medicare payroll taxes so they deserve the benefits as contracted. Likewise for vets. The indigent and disabled need care as part of our social moral imperative. But families living at 300% of the poverty level should be responsible for their own kids' health care expenses. That's my opinion. If we want to expand the program to middle class kids, then let's just go to Nationalized Health Care altogether, for everyone.

I know the responses:

  1. The Practical Approach. “The cigarette tax pays for it.” The proposed increase of $35 billion dollars over five years in this S-Chip entitlement is designed to come from a cigarette tax. Tax those dirty smokers and our kids will get free health care! It's a win-win! Yeah! But if we have resolve to tax smokers, and maybe we should, then why give the revenue to middle class families, many of whom already have insurance? The phenomenon of “crowd out” is when the initiation or expansion of a government benefit leads to the substitution of private payers for the said government program. Additionally, sin taxes such as this often result in lower than expected revenues as the sinners change their behaviors and engage in bootlegging untaxed contraband. Furthermore the increased need for law enforcement against bootleggers adds external costs thus depleting net revenue available. (I realize this was accounted for in the CBO Report.)

  2. The Emotional Plea. “Yea but, it's fer da kidz.” The problem I see with S-Chip as designed is that it provides no limits to the number of kids covered. Ten kids, no problem. Sure, it's not the kids' fault and they shouldn't suffer. The current S-Chip grant covers “da kidz”, all of them, up to 200% of poverty. That's enough. If private donors want to cover middle class families, then go for it.

  3. The Fiscal Responsibility Appeal. “Covering kids' health is cost-effective.” Providing routine care for kids saves society money in the long run. I would point out that the same argument is used for people in every age group: health maintenance is cost effective for all of us, so why give kids preferential treatment over adults? Especially kids whose parents are able to provide the insurance themselves.

Peter Drucker, the venerable economist and management expert, spent his life dissecting all manner of industries and determining the market forces involved. Macro forces as well as micro forces, labor issues, corporate governance, government interventions-- nothing was not examined. He was the author of 38 books, including many textbooks, was a contributor to and editor of numerous economic journals as well as the Wall Street Journal. In other words, he knew his shit. When asked about medical economics, however, Drucker was at a loss. The allocation of medical resources is made difficult by competing market forces and incentives (will a surgeon always recommend surgery?) and compounded by the asymmetry of market information (but the ads on CBS News say I need treatment for Restless Leg Syndrome and Toenail Fungus Disorder), the difficulty of assessing quality and the economic stresses of the employer-based insurance model (“I'll give you a raise if you opt out of the costly health insurance benefit.”) None of these problems have simple solutions.

As an anonymous commenter to the last entry has pointed out (although they failed to provide references), other economists such as Ken Arrow and more recently Uwe Reinhardt have also attempted to understand the health care morass. Reinhardt, with whose work I am quite familiar, has written extensively on the single-payer system and has written a Primer which compared the two Presidential candidates' plans in 2004. European nations and Canada have a greater percentage of health costs paid by the government versus the US, and a greater number of citizens covered by either governmental or private health insurance, and the Institute of Medicine has intimated that US quality of care is poor even though we pay a much greater percentage of our GDP on health care. Many folks much smarter than I am have devoted their careers to medical economics and I certainly don't pretend to know the answers.

Health care will be the defining issue of the next few election cycles. The consciousness being raised over the S-Chip expansion and the subsequent Bush veto is the beginning of a long overdue national discussion about health care coverage. My aspiration is that this leads to some type of universal health coverage and not just some lousy expansion of Medicaid, which is really what S-Chip is. My random observations about the current system:

  1. Means-testing needs to be revamped. Why do we only look at income? Conceivably an individual or family that has considerable property wealth but has a median income could qualify for welfare type benefits. This is not as much a problem when using 100% or 200% of the poverty level for income, but at an income of 60-70K, such as engendered in the proposed S-Chip expansion, the abuse potential increases since many of these families may have earned significant incomes and accumulated uncounted wealth. As I mentioned in the previous post, MiChild in Michigan relies on self-reported income, which is inadequate. Also, father's and even grandparents' income should be included in any means calculation, regardless of marital or co-habitation status.

  2. The risk pool needs to be expanded. Of the 44 million Americans who are not covered by health insurance at any given time, many of them are working and some are quite well-off. Often, healthy individuals will opt out of coverage to save money and then opt in when they are older or acquire an illness. This defeats the idea of a risk pool. Health insurance should be mandatory just like auto insurance. Doctors and Emergency Departments cannot “opt out” of treating a sick or injured person depending on their odds of getting paid, so every member of society has a moral obligation to be covered for such a liability. Even the poorer folks who are under-employed and have no employer benefits should be compelled to pay something-- either in the form of a payroll tax and/or a consumption tax-- and then be covered by a basic, government subsidized policy, or even better, with a universal health care plan. Nationalized health in some form, however unlikely to be popular among Bushies, would fulfill all these requirements.

  3. We are a rich country. Most people on Medicaid and S-Chip benefit greatly from these programs and deserve coverage. It's a very generous program. I don't mean to sound shrill about “kicking all the bums off welfare” and such because these programs are very necessary. I do find it odd, however, the numbers of folks I see who have hundreds of dollars of tattoos and nicer cell phones than I do, while they assume little of the responsibility for their necessities. We live in a very wealthy society and the dividends of such wealth and excess are obviously enjoyed by all socio-economic strata. One could argue that the poorest person in 21st Century America is better off than the English nobility of a mere century or two ago. We live longer, drink cleaner water, have vaccines and lower infant mortality, etc. This enormous wealth could be used much more effectively to provide for even more people.

  4. S-Chip pays Medicaid wages. Let's be clear on this. S-Chip is NOT insurance. Of the 35 Ob/Gyns in this county, only a handful accept Medicaid and S-Chip coverage. Why? Because the reimbursement is about 18 cents on the dollar-- not enough to cover overhead expenses. Medicaid and S-Chip may be called “insurance”, but they are actually welfare programs and health care providers only agree to see such patients as a service to the community. Physicians literally lose money for every Medicaid patient they see in the office, and if that patient number increases significantly and detracts from the numbers of privately insured patients, ie, "crowd out", then the pressures on primary care providers will mount. Even Uwe Reinhardt, the proponent for a single payer system, has recognized that such draconian discrepancies in reimbursement are unwarranted and harmful to the health of the system. Dr. Reinhardt (page 16) says:

My own reservation about these two public programs has been that the fees they pay providers tend to be unreasonably low, often not even covering the providers' costs. Not surprisingly, many physicians simply refuse to accept Medicaid patients, an option, however, that is not practical for hospitals.

I would agree with the erudite Dr. Reinhardt and I would go one step further. I feel that physicians taking care of the indigent should be paid more, like combat pay, than those taking care of the more wealthy. (Yeah, I'm a dreamer.) If we want to raise an additional cigarette tax, or any other consumption tax, then why not put that revenue toward proper reimbursement for providers who currently care for the truly indigent?

So the next time someone refers to S-Chip and its proposed expansion as insurance, please feel free to correct them of their delusion. And then ask yourself if a family at 300% of the poverty level and untold other assets should qualify.

Saturday, October 06, 2007

Bush, for once, is right!

However reluctant I am to do this, I have to give Bush some credit when it's due. I bust his chops on such a regular basis that it is only proper to back him when he does the correct thing, even when it's for the wrong reasons. Pay attention, this doesn't happen very often.

The latest controversy is about the S-Chip program (State Child Health Insurance Program). The bipartisan bill that came out of the House and passed by the Senate provides for health insurance through the federally funded Medicaid type program for lower income kids whose parents make too much money to be considered destitute. In fact, the cut-off as written in the bill provides for children living at 300% of the poverty line, in other words a family of four can have an adjusted gross income ( NOT gross income) of $61,950 for their kids to qualify for free health care. Bush is right, this is an outrageous use of a welfare program, but Bush is wrong to lie about the numbers and the express purpose of S-Chip. Why lie? The correct numbers are bad enough.

Let's run the tax bill, and since I'm not a tax accountant feel free to correct me. If a family of four has one wage-earner, say a father, earning $100,000 per year in gross income, he can put $15,000 into an employer sponsored 401(k) and other deductions, which leaves $85,000 in taxable income. Subtract the standard deduction for him and his family, according to this calculator, and he pays 15% of the adjusted gross income of $60,700, or $8,323. This guy with two kids and a six figure income pays less than 9% of his income in tax and gets health insurance for his kids. Is this not outrageous? Even if I'm off by 20%, which I'm sure I'm not, it's still outrageous. (In Michigan, the MiChild version of S-Chip relies on self-reported monthly income, which seems like an extremely lax eligibility test for such a generous benefit.)

A guy drags down $100K and a mere 8 Grand fulfills his entire obligation to our nation? This $8,300 supposedly covers his full share and that of his three dependents for necessities like national defense; federal regulatory agencies such as the SEC, FTC, FDA, FAA, etc; highways and aviation maintenance; national parks and monuments; enforcement of borders and interstate commerce; -- and he gets free health insurance for his kids to boot?

Whoa... I don't think so...

Is this even sustainable? I know that the program will supposedly be funded by murky ideas like a cigarette tax, and we all know how this will work. More families and employers will jigger their incomes in order to qualify for this unbelievably generous government benefit. My employer tells me it costs approximately $20,000 to provide health insurance for a family of four so the incentive to eliminate this cost is overwhelming. Less families will choose to have a second wage earners in order to stay under the income limit to qualify for S-Chip. More politicians will pander and demagogue the program to expand it, such as is done with all government programs, such as is exactly what this current expansion proposal is, thus leading to certainly increasing costs. And voila, we have a backdoor national health insurance for almost everyone's kids! Furthermore, less people will smoke, or at least less people will smoke taxable cigarettes as the gray market develops (Did you know a big bag of loose-leaf “roll your own” tobacco is not taxed?), so the projected funding will surely dry up for this ever-increasing, non-discretionary entitlement.

I'm all for nationalized health care; I am one of the few physicians I know who thinks that the time is way overdue to provide comprehensive care for all citizens. My objection to this specific expansion of S-Chip is that it is not comprehensive enough-- because it excludes folks like me-- and, more importantly, it has inadequate funding. I mean, come on, break me off a piece of this "free" health care plan stuff. Between Medicare, Medicaid and now S-Chip, the only schmucks actually paying premiums into the system appears to be dwindling. And let's be honest about how to pay for S-Chip expansion, or any expansion of government health coverage. The only appropriate plan would include a large payroll tax or, even better, a huge consumption tax on meat, fatty food, SUV's, ATV's, cigarettes, alcohol, women's make-up, baby food and formula, plastic surgery, men's hard-on drugs, hair coloring products, boats, leisure air travel, cell-phones, soft drinks, fast food, restaurants, diapers, and other dangerous or unnecessary indulgences to fund such an entitlement. This current plan only covers kids and then it lays none of the burden on the parents who are having these kids which they apparently cannot afford. The S-Chip program mandates no co-pays, no premiums, no limits to the number of kids covered. Do you want ten kids? Fine, we'll pay their health insurance for you! Furthermore, it's providing welfare-type benefits to families who hardly should qualify for welfare. The nanny state gone berserk.

Now I'll start my personal rant. My wife and I don't have kids-- by choice. We both work, and without dependent deductions (I wonder who made that rule), we pay gobs of income tax-- nearly ten times what my fictional father pays-- and we also willingly fork over a full share of property tax that educates all the urchins in the neighborhood and throughout the city. We patiently wait for the school buses every morning on our way to work, to which we go for the privilege of paying 40% of our gross income in tax, and cheerily support fund drives for basketball camps and drama clubs when the kids knock on our door to disturb our dinner hour. We tip the paper boy. We endure the screaming and hollering all summer, we surrender our city parks for boys baseball and girls soccer, and we clean up our yard from their dogs and cats. Tell me, do we really have to pay for their health insurance, too? Even the middle class kids?

Don't get me wrong, I think health care is great, and necessary, and very cost effective. I'm a firm believer in the ounce of prevention is better than a pound of cure maxim. In fact, I've devoted my life and a couple decades of training to this principle. But if you either cannot or will not provide basic sustenance for your progeny, then how about this for a novel idea: use birth control. And if you're a legislator who wants to be big daddy doling out my hard-earned tax dollars, then be truthful as to how much it will cost and who will pay, and how you will push to expand it in the years ahead. Everyone has their breaking point and for families making six figure incomes getting S-Chip bennies, well, for me, that's a bridge too far. I can also tell you anecdotes of folks I know who make oodles of cash, but their kids have children on S-Chip in its current iteration. Grandchildren of millionaires on the dole. Although true, I realize that's just an uncorroborated anecdote, so I'll leave it at that.

In closing, while Bush was right to veto the S-Chip expansion bill, he is still a doofus. A president should lay arguments like these out in a coherent form and engage all the congress critters behind the scenes to tone down such entitlements into a workable form. That's his job. That will defuse the furor that is growing now about this vetoed program. Unfortunately, Bush has spent all his political capital on a criminal war and pay-offs to his industry cronies, and all but his most strident co-conspirators or delusional base have abandoned him.

Bush is the architect of one of the largest and most egregious expansions of entitlements in world history when he designed Medicare Part D boondoggle for big pharma, so he's not one to talk. Furthermore, Bush has flushed down three quarters of a trillion dollars and counting into the Iraq rat hole which has funded his buddies in the oil and war contracting industries, so he's definitely not one to talk. Where have all the real conservatives gone?

I see a tsunami of anti-Bush Democrats demagoging this S-Chip issue into office in 2008, and then we'll have to see what manner of entitlement expansion takes place. And it's entirely Bush's fault. As a presumed conservative, Bush has been responsible for the most massive waste of tax dollars in our history, and that is not what conservatives are elected to do. Not co-incidentally he is now likely ushering in a whole passel of non-compromisers who will eventually get this crappy S-Chip pandering bill either signed by a Democratic president or passed with a veto over-ride. In the grand drama, that's what liberals do-- and they will.

After I rant and spew electrons all over the internets, I realize that a choice has to be made. Do I side with the starry-eyed liberals who want to provide health care for only a select few, or do I side with Bush who has no idea why he vetoed the bill? Given the choices available, I guess I'll have to take the starry-eyed pandering liberals over the criminal idiocy of the murderous and delusional Republicans.

Hi ho. It's off to work I go.

Wednesday, October 03, 2007

All that Glitters is Not Gold: Sometimes it's Oil, too

Occasionally a light bulb flashes on and for a split second I see the miles of landscape in all its tortuous detail. Everyone gets this from time to time, it's called insight or inspiration or intuition.

Gold hit a 27 year high this week before pulling back today to about $730 per ounce. Oil likewise has been on a tear, now at $80 per barrel, due to geopolitical tension and increasing demand from developing economies. Also, agricultural grains and livestock have seen higher demand worldwide as more people move into the middle class. So while the prices of many essential items have been increasing, the official US inflation rate is reported as low, mainly because the government chooses to exclude food and energy from their statistics.

Here's the deal, and feel free to correct me if I'm wrong.. The Consumer Price Index, as a measure of inflation, is a balance between various commodities, assets and products that the government sets in order to measure the stresses and strains on the economy. At any given time, some assets are deflating while others are inflating in value, and monetary policy is supposedly set to keep these in line.

The problem is that the assets most of us working folks are not increasing in value, while the costs of those commodities on which we rely are increasing in cost. We get paid in US dollars, and the US dollar has decreased in value against every major currency and is now at an all time low in the dollar index. Our houses have likewise decreased in value, or at least have not increased in value commensurate with inflation. US stocks, while they may have increased in dollar terms, the gains have been mitigated by the continued decrease in the dollar index, so in real terms the gains versus commodities and foreign currencies have been negligible or negative.

This devaluation of our homes and our paychecks has occurred at the same time our real world cost of living has increased. The government tells us that the CPI is 2.3%. Bullshit. Gas has increased 45% in two years and food has increased at least 20% depending on what your family eats. Food and energy are a proportionally larger part of the living costs for a middle class family. When the government uses a decrease in home prices to offset the increase in gas and food, then the numbers are skewed and they are not reflecting the true cost of living for the average American. Barry Ritholtz at The Big Picture has been a stalwart voice expounding on the inflation numbers coming out of the federal government.

Recently we have seen a ripple go through the credit markets due to a large increase in the numbers of subprime mortgages that have been made. With interest rates at historic lows, the housing market has been booming, but apparently that growth was not enough for the mortgage lenders who took liberties to loan money to people who had no assets or job, and what ho!, they can't pay their mortgages. Imagine that.

The federal reserve chairman, Ben Bernanke, has acted to bail out the economy by adding liquidity, i.e. lowering short term interest rates that the fed charges banks. The immediate effect of this move is to assuage the fear that homeowners will default on their mortgages by keeping interest rates low enough for many marginal mortgage holders to hang on for a while longer. The other immediate effect is to remove the moral hazard that would normally have been felt by lenders who made such ill-advised loans. It's a bail out. The ultimate effect for the rest of us, however, is a further devaluation of the dollar, i.e. our paychecks are worth less.

Which brings us back to gold and its 27 year high. I'm not some wingnut goldbug who has stashes of Krugerrands in my mattress. Most of my retirement funds are in diversified stock mutual funds and I do very little trading of these retirement funds other than an occasional re-balance.* Lately, however, I've been a little leery. The rise in gold and other commodities has me spooked. How long can we devalue the US dollar and not feel some pinch in the overall US economy? When will foreign investors lose confidence in holding US dollars? The current rise in gold, silver, platinum and copper prices is evidence that the US dollar may be losing its cache as the haven of safety in a tempestuous world. As geopolitical tension rises, US treasuries and dollars should become more sought after, and that's not happening.

Historically, the last time such dollar devaluation had occurred was the early 1970's. Nixon took the US dollar off the gold standard, we had huge war debt from an unwinnable and unpopular war and inflation tore up the value of the greenback. Sound familiar? As we rattle sabres against Iran, where do you think the price of oil and gold will go, or is it all baked in already? If you think the price of gold will stop short of an all time high now after rising this far, please let me know your rationale. If you think that some technological breakthrough will make the fossil fuel internal combustion engine obsolete before the Chinese hit he highways, please let me know.

Sure, economic slowdowns will occur and financial cataclysms will happen from time to time, but the macroeconomic tendencies all point to a continued increase in the use of commodities and the continued decrease in the value of the US dollar versus gold and other hard assets.

These are not merely rhetorical observations. If you had $100,000 to invest, where would you put it? Would you buy US real estate? Ha! Would you buy US dollar denominated stocks like Starbucks and General Electric? Perhaps the latter. Or would you play into the global growth story and invest in areas that are a lock to grow over the next 10 or 20 years? The two dominant themes, as I see it (and have seen it for a while now), are 1) Asia, and 2) commodities. And get rid of your dollars.


* My retirement funds are sacrosanct and are invested in staid Fidelity funds of various stripe. However, I do have a stash in a discount brokerage account that is traded actively, and fortuitously has been a source of fun, adventure, intellectual challenge and significant wealth generation lo these many years. I make a point not to comment on individual trades, but perhaps I'll alter this policy in the future.